We’re likely to get mixed signals from major economies next week. In the eurozone purchasing managers surveys should confirm that growth has slowed to a near-standstill – an image confirmed by official figures on Friday showing that unemployment is now flatlining. One reason for this will be evident in other purchasing managers’ surveys, which will show that Chinese manufacturing – and hence demand for western goods – is still contracting.
There might, though, be a glimmer of hope. Monday’s money stock data should show that the slowdown in M1 growth is more or less over. This matters, as this growth is a lead indicator of future growth in output.
In the US, Friday’s ISM survey should show strong growth, albeit not quite as much so as last year. There will, though, be worrying developments in the housing market. The S&P/Case-Shiller index could show that house prices have fallen since the summer, while sales of new homes might be lower than a year ago. This is having an impact on consumer confidence: the Conference Board could report that this has fallen since the autumn, although it is still very high by longer-term standards.
In the UK, purchasing managers should report slow but steady growth in manufacturing. The personal sector, however, might look more worrying. Consumer confidence might slip to its lowest level since 2013 – albeit more due to concerns about the general economic outlook than people’s own personal finances – and consumer credit growth could fall to its slowest rate since 2014.
There’ll also be signs of housing market weakness. The Bank of England could say that mortgage approvals have fallen: they’ve moved sideways since the autumn of 2017. And the Nationwide could report that house price inflation is well under 1 per cent, meaning that prices are falling in real terms.
One thing that is not a problem, though, is inflation. Official figures are likely to show that this is flat in the euro area at around 1.4 per cent for the headline rate and 1.2 per cent excluding food and energy. This could reinforce criticism of the ECB for its longstanding tendency to worry too much about inflation and so keep monetary policy tighter than it should be.
